Elon Musk once again occupies a place he loves: at the center of attention and conversation.
The billionaire entrepreneur dropped a bombshell on July 8 by announcing in a Securities and Exchange Commission filing that he was no longer buying Twitter (TWTR) – Get Twitter Inc. Report after nearly three months of a saga rocked by twists and tensions.
In the end, the reason he cites for his withdrawal is not Twitter management’s resistance but the platform’s familiar problem: fake accounts, also known as spam bots.
Twitter has always disclosed in its financial documents that these fake accounts represent perhaps 5% of the total number of users. Musk reckons it’s much more than that; he has accused management of bad faith and says this is a valid reason to break the engagement.
“Mr. Musk is terminating the merger agreement because Twitter is in material breach of multiple provisions of that agreement,” Musk’s lawyers alleged in the filing.
In addition, Twitter “appears to have made false and misleading representations” about fake accounts, the filing alleged.
Big Legal Battle
The number of users is important because it enables advertisers to assess whether promoting their products and services on the site is worthwhile and to determine which platform would allow them to reach the widest possible audience they want to reach.
The story is far from over. Twitter has said that it would take legal action to force the richest man in the world to honor his commitments. The battle would therefore move from the boardroom to the courtroom.
The social network has hired some of the fiercest lawyers to defend its cause. Twitter’s board over the weekend hired the corporate-law and merger specialists Wachtell, Lipton, Rosen & Katz. Twitter is reportedly ready to file suit against Musk early this week in Delaware.
Delaware, corporate home of many companies including Twitter, has experts in business law, or Chancery judges, who hear and decide cases. They may decide to award punitive damages. These same Chancery judges also decide whether a breakup fee should be paid or not.